Main Estimates narratives: Standing Committee on Government Operations and Estimates—April 29, 2022
Document navigation for "Standing Committee on Government Operations and Estimates: April 29, 2022"
On this page
Funding for increases in non-discretionary expenses associated with Crown-owned buildings and leased spaces (real property price and volume protection)
Project summary
The funding is for the protection from inflation and price variations relating to space requirements for real property items for which Public Services and Procurement Canada (PSPC) has very little or no control.
Mains over mains variance
The following table includes 2021 to 2022 and 2022 to 2023 year-over-year variance.
| Exercises | 2021 to 2022 | 2022 to 2023 and ongoing | Year over year variance |
|---|---|---|---|
| Total Main Estimates budgetary expenditures | 347.1 | 464.4 | 117.3table 1 note 1 |
Table 1 Note
|
|||
The increase in funding of $117.3 million will protect PSPC from non-discretionary price and volume fluctuations associated with crown-owned buildings and leased spaces. The costs relate to items for which PSPC has very little control such as rent, cost of utilities and accommodations (space requirements for public servants) costs.
- $41.4M to cover planned price fluctuations in 2022 to 2023 (based on a forecasted consumer price index (CPI) of 2.03%)
- $43.1M to cover planned volume variations in 2022 to 2023 (based on 1.8% of the $2.37B 2021 to 2022 gross budget)
- $81.2M for price and volume variations for 2020 to 2021
- ($48.4M) for price and volume variations for 2019 to 2020
Background
PSPC meets the accommodation needs of federal organizations by providing and maintaining a cost effective real property portfolio of office facilities and common use assets.
Real Property’s portfolio is comprised of facilities either owned by the Crown or leased from the private sector, some with the option to purchase:
- 103 departments and agencies (approximately 50% of public servants located in the National Capital Area)
- 6.9M square meter office space or special purpose facilities
- 341 Crown-owned facilities (excluding Cape Breton Operations), 1,187 leased and 10 lease purchase facilities (as of October 18, 2021)
- This funding is included in the gross building special purpose allotment budget of $2.4B for federal accommodation, as well as federal infrastructure and Parliament Hill and surroundings programs. PSPC is forecasting to spend 99% of the budget by year-end:
- federal infrastructures include power plants, bridges, dams, roadways and other engineering assets
- Parliament Hill and surroundings program provides office and special use accommodations space for the Senate, House of Commons, Library of Parliament and other parliamentary partners
Price and volume methodology
The current methodology used was approved in 2014 and is subject to a review on a 5-year cycle, which was most recently completed in 2020. The review found that the methodology has met PSPC’s needs for an objective, simplified and verifiable framework for integrating both price and volume variations into quasi-statutory requests for eligible real property and infrastructure operating costs. Completion of the next 5 year review of the methodology is planned for December 2025.
In return for this protection, any unspent funds are returned to the fiscal framework:
- formula considers:
- consumer price index (inflation)
- actual spending
- variations to the inventory
- reconciliation exercise: compares the funding provided previously based on forecast to actuals, ensuring PSPC is not over/under funded
Procurement initiatives
Project summary
Budget 2021 announced funding for procurement initiatives to be used to continue to modernize federal procurement and create opportunities for specific communities by diversifying the federal supplier base. Further, domestic procurement will be prioritized, accessibility considerations will be incorporated into procurement, and data capture, analytics, and reporting will be improved.
The funding will also ensure that PSPC is adequately prepared to support the Canadian Coast Guard and the Canadian Armed Forces as they both continue to deliver defence and marine procurement projects via Canada’s defence policy: Strong, Secure, Engaged and the National Shipbuilding Strategy.
Mains over mains variance
The following table includes 2021 to 2022 and 2022 to 2023 year-over-year variance.
| Exercise | 2021 to 2022 | 2022 to 2023 | Year-over- year variance |
|---|---|---|---|
| Total Main Estimates budgetary expenditures | 0table 2 note 1 | 30.7 | 30.7table 2 note 2 |
Table 2 Notes
|
|||
Background
As the federal government’s central purchasing agent, PSPC plays a principal role in delivering procurement services and managing the procurement function, including strategically boosting competition, leveraging purchasing power, strengthening the capacity to manage ongoing contracts, enhancing results, and streamlining the procurement process. With more than 1,900 procurement employees across the country, PSPC manages the procurement of goods and services valued at approximately $22 billion on behalf of client departments and agencies every year.
To support the transformation of procurement, Budget 2021 announced ongoing funding to support a number of PSPC activities including:
- creating greater inclusion and diversity among suppliers by leveraging procurement opportunities
- continuing the modernization of procurement
- delivering on Defence and Marine Procurement
Leveraging procurement opportunities ($18.2 million including EBP and excluding Shared Services Canada and accommodation charges)
Procurement modernization and inclusivity initiatives will allow the government to continue to improve relations with vendors, improve opportunities for under-represented groups to participate in the government supply chain, and remove barriers for persons with disabilities. To do this, PSPC is using several strategies such as accessible procurement, social procurement, Indigenous procurement, and outreach and engagement with under-represented suppliers.
By modernizing procurement, PSPC will help the government to achieve a world-class procurement system that drives value for money while advancing government socio-economic objectives, simplifying the procurement system for suppliers and client departments, and delivering better results for Canadians.
Modernizing the procurement workforce ($6.3 million including EBP and excluding Shared Services Canada and accommodation charges)
The funding will enable PSPC to rebuild its procurement workforce capacity and prevent program integrity issues. More importantly, it will ensure that PSPC has the necessary capacity to implement the numerous initiatives designed to modernize PSPC procurement. It will also ensure capacity to deliver procurements in support of infrastructure initiatives to support economic recovery. The increase in procurement workforce will be aligned with PSPC’s Diversity and Inclusion Action Plan which ensures women, visible minorities, Indigenous peoples, and persons with disabilities are adequately represented in PSPC’s workforce.
Enabling defence and marine procurement ($6.2 million including EBP and excluding Shared Services Canada and accommodation charges)
The Department of National Defence (DND) will be increasing its spending to implement Canada’s defence policy: Strong, Secure, Engaged (SSE) and its participation, along with the Canadian Coast Guard (CCG), in the National Shipbuilding Strategy (NSS). In collaboration with partnerships with other government departments and agencies, PSPC will ensure that Canada’s biggest and most complex National Defence and Canadian Coast Guard procurement projects are delivered.
To ensure timely delivery of procurement services to support SSE and NSS, PSPC requires resources to ensure the growth of the defence procurement workforce. This increased capacity is necessary given the expected growth of SSE-related spending within DND and to provide sufficient resources to support new NSS commitments (for example, CCG fleet renewal and third shipyard).
Planning for capital and fit-up
Project summary
Public Services and Procurement Canada manages a wide range of capital projects on behalf of the Government of Canada. To successfully deliver on capital assets and infrastructure projects, such as revitalizing federal laboratories and modernizing the federal accommodation space and the Parliamentary Precinct, planning activities are important to ensure adequate and efficient use of resources, as well as meeting project timelines.
Mains over mains variance
The following table includes the 2021 to 2022 and 2022 to 2023 year-over-year variance.
| Exercise | 2021 to 2022 | 2022 to 2023 | Year-over-year variance |
|---|---|---|---|
| Total Main Estimates budgetary expenditures | 136.8 | 165.1 | 28.3table 3 note 1 |
Table 3 Note
|
|||
The funding increase of $28.3 million for planning for capital and fit-up aligns to PSPC’s current funding approvals and will be used to pursue the planning and delivery of critical infrastructure projects such as for Laboratories Canada, the West Memorial Building rehabilitation and the Long-Term Vision and Plan of the Parliamentary Precinct.
Background
In 2017 to 2018, PSPC implemented the new capital vote definition which stipulates that all expenditures of a capital nature are to be incurred from within the capital vote. Other activities that do not meet the capitalization criteria should be recorded under the operating vote. Since planning activities fall in the latter group, a new vote 1—special purpose allotment (SPA) was created to record non-capital activities related to projects.
Since its creation, the SPA has evolved to include the non-capitalizable expenditures related to project inception, identification and delivery activities consistent with PSPC's National Project Management System (now replaced by Project Navigator), non-capitalizable expenditures related to refit and fit-up activities (for example, swing space) and non-capital specific projects.
Budget 2019 announced PSPC’s transition towards accrual budgeting with the goal to have stable capital funding to be used for PSPC’s existing and planned tangible capital assets over the long term. One of the key elements for ensuring successful delivery of capital projects is the planning and implementation phases, which supports the effective financial and risk management of the capital management plan.
Planning includes activities such as:
- feasibility studies
- options analysis
- investigations (for example, soil condition, municipal infrastructure)
- consulting support
- pre-tender contracting work
- statement of requirements
- pre-design activities
Capital expenditures in the Long-term Investment Plan
Summary
Public Services and Procurement Canada oversees a vast portfolio of real property and digital services capital assets that include over 1500 buildings, the historic Parliamentary Precinct, bridges, dams, highways, central heating and cooling plants, science laboratories, digital and fleet assets across Canada.
In order to support the on-going management of these critical assets, the department was provided predictable capital funding on an ongoing 20-year period through the Capital Investment Fund (CIF). The implementation of the CIF in 2019 required that the department transition to an accrual budgeting framework rather than the traditional cash budgeting framework used by the department. This transition to accrual budgeting helps ensure a more effective and efficient delivery of PSPC’s infrastructure and digital programs by enabling an integrated approach to investment planning and life-cycle management of assets. The CIF allows PSPC to plan projects based on current and emerging priorities while addressing the long-term state of the portfolio.
Mains over mains variance
The following table includes the 2021 to 2022 and 2022 to 2023 year-over-year variance.
| Exercise | 2021 to 2022 | 2022 to 2023 | Year-over-year variance |
|---|---|---|---|
| Total Main Estimates budgetary expenditures | 1,635.3 | 1,611.6 | (23.7)table 4 note 1 table 4 note 2 |
Table 4 Note
|
|||
PSPC is seeking $1,611.6 million in capital vote 5 to deliver on its capital investment. The net decrease of $23.7 million (including employee benefit plans of $1.1 million) in capital vote 5 reflects PSPC’s current funding approval sought to deliver on its capital investment plan. The department will seek updated approval as required in order to maintain the quality of its infrastructure for the benefits of all Canadians.
The new CIF funding model has resulted in a transformative process moving PSPC from its historic approach of investing in individual projects based on the availability of funding to long term portfolio and investment planning supported by secured funding to deliver portfolio outcomes.
PSPC is committed to enabling the long-term sustainability of government operations through strategic asset investments and service excellence that empowers public servants, partners and stakeholders to deliver on their organizational mandates while ensuring sound stewardship of public funds and socio-economic benefits to Canadians. The department developed the PSPC Asset Portfolio Long Term Strategy and plans.
The Investment Plan is aligned with the PSPC Asset Portfolio Long Term Strategy which focus on integrated, enterprise-wide investment planning. The strategy goes beyond the traditional way of managing capital assets and leverages portfolios to achieve broader government objectives and becomes a platform to fight climate change, build a stronger and sustainable economy, build communities and partnerships and support modern digital government.
The strategy works to transform the perception of real property assets from cost drivers and sources of risks into strategic enablers that can advance objectives and derive public value for Canada.
The PSPC Asset Portfolio Strategy is grouped into 2 broad categories of investments based on their primary purpose: infrastructure and enabling services.
Infrastructure investments
Investments are made in assets that enable the delivery of government programs and services administered by various client organizations and assets that are used by the general public. The 4 groups of assets are:
-
Parliamentary assets: To meet the accommodation requirements of a 21st century Parliament, and to create a blueprint to renew Canada’s seat of government by rehabilitating heritage buildings and through new construction
- the major project is the rehabilitation of the Centre Block, one of the largest heritage infrastructure projects in Canadian history. PSPC is restoring and modernizing the building (structural and seismic reinforcements, security enhancements and completely new building systems) to bring it up to modern safety, environmental and accessibility standards
-
Office assets: To provide public servants with accommodation space that is modern, green, connected and conducive to the effective delivery and achievement of government’s programs priorities and objectives. Some of the projects include the following:
- workplace renewal initiative: To modernize workplaces to allow greater flexibility in where and how federal employees work so they can be as productive as possible in delivering programs and services to Canadians. The renewed workplace will be based on the following 7 dimensions:
- flexible
- digital
- efficient
- green
- inclusive
- collaborative
- healthy
- West Memorial Building: To revitalize the West Memorial Building, an important classified heritage building, which will be used as interim accommodation during the renovation of the Supreme Court of Canada Building
- workplace renewal initiative: To modernize workplaces to allow greater flexibility in where and how federal employees work so they can be as productive as possible in delivering programs and services to Canadians. The renewed workplace will be based on the following 7 dimensions:
-
Science assets: To create multi-purpose, collaborative, sustainable, and technologically modern federal science and technology facilities across the country:
- also known as the Laboratories Canada initiative. Its goal is to renew federal laboratories and promote greater collaboration between federal scientists and academic and private sector researchers
- PSPC continues advancing phase I of Laboratories Canada projects, which involves the replacement of outdated facilities with new, state of the art science facilities
-
Engineering assets: To provide sound stewardship of engineering assets, by ensuring they remain in good condition so that they respond to Canadians’ needs and, where possible, contribute to the strategic objectives of the federal government:
- PSPC’s portfolio of engineering assets includes bridges, dams, highways, marine infrastructure and district energy system
- Energy Services Acquisition Program: To modernize the district energy system that heats 80 and cools 67 buildings. This will in turn reduce greenhouse gas emissions, save money and improve safety
Enabling services investments
PSPC is investing in enabling services that comprise assets that enable the department to deliver its programs and services and other government operations through digital systems. The 2 groups of assets are:
-
Digital assets: To modernize the systems and tools that will enable PSPC to deliver high quality digital services to federal organizations and clients in a secure manner. Two important projects include:
- Government of Canada (GC) trusted platform: To employ the appropriate security safeguards to protect data subjected to highly-sophisticated cybersecurity threats, which will allow departments to increase the number of services being provided to the public
- industrial security system transformation project: To replace the aging industrial security systems with an efficient, reliable, user friendly and highly integrated electronic system that will make it easier for individuals and businesses to submit completely paperless security clearance requests
- Fleet assetsFootnote 1: To transition toward the most energy efficient and zero emission vehicles available and to enable the long term sustainability of government operations while meeting the needs of program operations with the greenest possible vehicles
Background
Accrual budgeting
Since 2003, the Government of Canada’s annual financial statements (the Public Accounts) have been produced on an accrual accounting basis which uses the accrual costs of programs, instead of their cash profiles, to calculate the fiscal balance. The federal budget is also prepared on an accrual basis.
Budget 2019 announced PSPC’s transition towards accrual budgeting with the goal to have a stable capital funding to support the department’s existing and planned capital projects. PSPC is the second department to implement accrual budgeting following the Department of National Defence in 2005.
The change to accrual budgeting allows PSPC to shift from securing funds project-by-project, to securing portfolio-level long-term planned investments. Historically, the management of capital budgets under a cash based budget approach has limited PSPC’s financial flexibility. Funding uncertainties led to short term planning and delays of critical capital investments.
Accrual budgeting focuses on enabling proactive, long-term and strategic planning for PSPC's capital asset portfolios through access to stable capital funds. This results in PSPC being able to plan for the required assets and services to better support the delivery of the government’s priorities across all of PSPC’s programs and services while also increasing transparency for central agencies and Canadians.
Accrual budgeting is transformational for PSPC and in order to fully realize the benefits, the department is working with stakeholders to ensure systems and processes are in place to successfully implement and deliver. These changes support the PSPC vision by encouraging a culture of collaboration and acting as a catalyst for managing assets in a more sustainable and holistic way. As PSPC strives to renew its infrastructure, build a workplace of the future and ensure its operations are sustainable and accessible, accrual budgeting will be critical to achieving the department’s goals.
Purposes and benefits
Accrual budgeting:
- establishes long-term predictable capital funding, essential to support portfolio investment planning
- enables PSPC to establish and implement investment strategies which transparently align investments with the use of its assets:
- buildings
- information technology
- specialized assets such as bridges, dams and heating plants
- enables a shift away from one-off approvals to portfolio-wide multi-asset investments planning and implementation:
- this will provide parliamentarians and Canadians with a much clearer understanding of the overall capital requirements, timing and strategic planning